BHEL is a case of destruction of the business by the government. They allowed zero duty import of power equipment ostensibly to benefit the power generators who were going to set up huge capacities. A large number of companies like Larsen and Toubro, Thermax, Bharat Forge who set up domestic capacities were thus made uncompetitive. This bought about a number of non serious players who tied up with Chinese power equipment companies or thought that they would bid at any level and also bet on an appreciating INR while bidding aggressively for NTPC and other SEB orders. The absurd policy of lowest bidder wins that PSU;s follow lead to companies like BGR Energy bid very aggressively and get orders. They had plans of importing the first few equipment packs, however at that time the INR was at Rs 45 levels. Now the same INR is at Rs 60 levels and as such the imports have become clearly uncompetitive. Now NTPC will need to go for a rebid and the capacity addition will be hugely delayed. On the other hand serious players who had set up domestic capacities do not have much orders. Also by giving Ultra Mega Power Project orders to players who bid very aggressively the entire power capacity addition targets have gone for a toss. However this is not the point of the article. The main point is that irrational competition, bureaucratic & environmental delays etc have made the entire power sector sick. As a result today BHEL is in a bad shape and the stock price now trades at just 20% of its peak value.
Posted on: Wed, 07 Aug 2013 01:46:19 +0000
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